Can a law firm require a departing associate to pay back a percentage of fees earned from former firm clients who follow the associate?
Ohio BPC Opinion 91-003: Employment Agreement Requiring a Departing Associate to Pay the Firm a Share of Fees
Short answer: The opinion concluded that a separation provision requiring a departing associate to pay the firm a percentage of fees later earned from former firm clients who chose to follow the associate is unethical.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Ohio Board of Professional Conduct's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.
About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.
Plain-English summary
The Board addressed a proposed employment agreement in which a departing associate, upon leaving, could take the files of clients who chose to leave with him, but had to pay the firm a portion of fees earned over the next two years from any departing client who had been a firm client rather than one the associate had generated. The Board concluded the provision was unethical.
The opinion applied DR 2-108(A), which bars a lawyer from being party to a partnership or employment agreement that restricts the right to practice after termination, except as a condition of retirement benefits. The Board noted that Ohio's DR 2-108(A) was identical to the ABA Model Code provision and substantially similar to Model Rule 5.6(a), and that the Comment to Model Rule 5.6 explains such agreements limit a lawyer's professional autonomy and a client's freedom to choose counsel and prevent lawyers from bartering in clients. Drawing on its own Op. 90-14 and opinions from many other states, the Board reasoned that a financial disincentive to serving departing clients burdens the departing attorney and impairs clients' freedom to choose, so such payment provisions are prohibited by DR 2-108(A). The opinion further concluded that the required payments would not satisfy DR 2-107(A), because they were neither a division in proportion to services performed nor an agreement with the client where all lawyers assume responsibility. The Board concluded the provision also violated public policy by interfering with a client's freedom to choose counsel.
Currency note
The Board's status list flags this opinion as Withdrawn by Opinion 2021-07 on August 6, 2021. This opinion issued in 1991 under Ohio's former Code of Professional Responsibility (superseded by the Ohio Rules of Professional Conduct effective February 1, 2007). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current Ohio Rules of Professional Conduct before relying on any specific rule mentioned here.
Common questions
Q: Can a firm make a departing associate pay back fees from clients who follow him?
A: Under this opinion, no, where the payback applies to former firm clients. The Board concluded such a separation provision is unethical under DR 2-108(A) and DR 2-107(A) and against public policy.
Q: Why is a fee-payback clause treated as a restriction on the right to practice?
A: The opinion reasoned that the financial disincentive may discourage or prevent the departing associate from serving clients who wish to keep him, so it practically limits both the lawyer's autonomy and the client's freedom to choose counsel, contrary to DR 2-108(A).
Q: Did it matter whether the associate originated the client?
A: The proposed provision required no payment for clients the associate himself generated. The Board's conclusion of unethical conduct addressed the payback tied to former firm clients who chose to follow the associate.
Background and rules framework
The opinion interprets the former Code of Professional Responsibility DR 2-108(A) (agreements restricting the right to practice, with an exception for retirement benefits) and DR 2-107(A) (division of fees among lawyers not in the same firm). It treats ABA Model Rule 5.6(a) as substantially similar and relies on its Comment.
Citations and references
Rules of Professional Conduct:
- ABA Model Rule 5.6(a), restrictions on the right to practice (treated as substantially similar)
Rules of Professional Responsibility (Ohio, former):
- DR 2-108(A), agreements restricting the right to practice
- DR 2-107(A), division of fees among lawyers not in the same firm
Other opinions cited:
- Ohio Board, Op. 90-14 (1990): restrictive covenants limit a client's freedom to choose a lawyer
- ABA Comm. on Ethics and Professional Responsibility, Informal Op. 1072 (1968); ABA Comm. on Professional Ethics, Formal Op. 300 (1961): geographic restrictive covenants
- State Bar of Texas Op. 459 (1988); Philadelphia Bar Ass'n Op. 89-3 (1989); Kentucky Bar Ass'n Op. 326 (1987); Virginia State Bar Op. 1232 (1989); Connecticut Bar Ass'n Op. 89-26 (1989); Pennsylvania Bar Ass'n 88-249; District of Columbia Bar Op. 194 (1988); State Bar of Michigan Op. CI-1145 (1986); cf. Maryland State Bar Ass'n Op. 89-22 (1989)
See also
- Ohio BPC Op. 1990-014: Restrictive Covenant and Non-Competition Among Lawyers
- Ohio BPC Op. 1991-005: Lawyers in Association Are Not in the "Same Firm" for Fee Division
- Ohio BPC Op. 1988-026: Fee Division Where Responsibility Is Assumed
Source
- Landing page: https://ohioadvop.org/advisory-opinion-index/
- Original PDF: https://www.ohioadvop.org/wp-content/uploads/2017/04/Op-91-003.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
The Supreme Court of Ohio
BOARD OF COMMISSIONERS ON GRIEVANCES AND DISCIPLINE
41 SOUTH HIGH STREET-SUITE 3370, COLUMBUS, OH 43215-6105
(614) 644-5800 FAX: (614) 644-5804
OFFICE OF SECRETARY
OPINION 91-3
Issued February 8, 1991
Withdrawn by Adv. 2021-07
[CPR Opinion-provides advice under the Ohio Code of Professional Responsibility which is superseded by the Ohio Rules of Professional Conduct, eff. 2/1/2007.]
SYLLABUS: A law firm's proposed employment agreement is unethical when it contains a separation provision requiring a departing associate to pay the firm a percentage of fees earned thereafter from former firm clients who have chosen to become clients of the departing associate. The separation provision violates DR 2-108 (A) by restricting a lawyer's right to practice law after termination of a relationship created by agreement. The separation provision violates DR 2-107 (A) by improperly dividing fees among lawyers not in the same firm. The separation provision is also against public policy as it interferes with a client's freedom to choose counsel.
OPINION: Your law office has proposed an employment agreement to be signed by associates covering a variety of topics. You inquire whether it is ethical for the employment agreement to contain a separation provision requiring a departing associate to pay the firm a percentage of fees earned thereafter from former firm clients who have chosen to become clients of the departing associate. You describe the separation provision as follows: 1) when as associate decides to depart, the clients' files would be interim billed; 2) the associate could then leave with the files of the clients who choose to depart with the associate; 3) if the departing client was generated by the departing attorney, then no follow-up payment to the law office is required; 4) if the departing client was a firm client, not generated by the departing associate, then the departing attorney is required to make payments to the firm for portions of the fees generated for the next two years.
DR 2-108 of the Code of Professional Responsibility clearly proscribes agreements restricting the practice of lawyers. DR 2-108 (A) states the following:
A lawyer shall not be a party to or participate in a partnership or employment agreement with another lawyer that restricts the right of a lawyer to practice law after the termination of a relationship created by the agreement, except as a condition to payment of retirement benefits. CPR, DR 2-108 (A).
The language of ABA Model Code DR 2-108 (A) is identical to Ohio's DR 2-108 (A). The language of ABA Model Rule 5.6 (a) is substantially similar to DR 2-108 (A). The Comment to Model Rule 5.6 states that agreements restricting the right to practice limit the attorney's professional autonomy and a client's freedom to choose a lawyer. The rule also prevents lawyers from bartering in clients.
Restrictive covenants in employment contracts among lawyers are generally considered unethical. The Board of Commissioners on Grievances and Discipline has previously stated that restrictive covenants unduly limit a client's freedom to choose a lawyer. Ohio Sup.Ct., Op. 90-14 (1990). Restrictive covenants pertaining to limitations on practice within a geographic area have long been considered unethical. ABA Comm. on Ethics and Professional Responsibility, Informal Op. 1072 (1968), ABA Comm. on Professional Ethics, Formal Op. 300 (1961).
In recent years, committees in many states have expressed the opinion that provisions in employment agreements that serve as economic disincentives to departing attorneys are unethical. See State Bar of Texas, Op. 459 (1988); Philadelphia Bar Ass'n, Op. 89-3 (1989); Kentucky Bar Ass'n, Op. 326 (1987); Virginia State Bar, Op. 1232 (1989); Connecticut Bar Ass'n, Op. 89-26 (1989); Pennsylvania Bar Ass'n, 88-249 (undated); District of Columbia Bar, Op. 194 (1988); State Bar of Michigan, Op. CI-1145 (1986). But see Maryland State Bar Ass'n, Op. 89-22 (1989). The Texas, Pennsylvania and Virginia opinions directly address whether payment provisions similar to the suggested provision in this hypothetical question are ethical. The opinion of these committees is that it is unethical to require a departing attorney to pay law firm fees or a percentage of fees earned thereafter from former clients of the law firm.
An employment agreement with a financial disincentive to serving clients improperly places a burden on the departing attorney and impairs clients' freedom to choose counsel. The financial burden placed on the attorney results from a client's valid choice to choose counsel. The client's freedom is impaired because the financial disincentive to the attorney may interfere with the attorney-client relationship by discouraging or preventing the departing associate from serving clients who wish to continue being represented by him. Although such agreements may not facially appear to limit professional autonomy or a client's freedom to choose, the practical effect may limit both. Such payment provisions which penalize the attorney and ultimately his clients for exercising valid choices are prohibited by DR 2-108 (A). Under the rule, professional autonomy and a client's freedom to choose are not outweighed by a law firm's interest in protecting itself from competition.
Further, any agreement that requires fees to be divided by lawyers who are not in the same firm must comply with DR 2-107. The payments suggested by this hypothetical agreement would appear to be neither a division in proportion to the services performed by each lawyer nor an agreement with the client where all lawyers assume responsibility for the representation as required by DR 2-107 (A).
Therefore, this Board is of the opinion that an employment agreement is unethical when it contains a separation provision requiring a departing associate to pay a law firm a percentage of fees earned thereafter from former firm clients who have chosen to become clients of the departing associate. The separation provision violates DR 2-108 (A) by restricting a lawyer's right to practice law after termination of a relationship created by agreement. The separation agreement also violates DR 2-107 (A) by improperly dividing fees among lawyers not in the same firm. The separation provision is also against public policy as it interferes with a client's freedom to choose counsel.
This is an informal, non-binding advisory opinion based upon the facts presented and limited to questions arising under the Code of Professional Responsibility.